August 18, 2009
Short selling is fundamentally abhorrent, and attempts to strike a balance to ameliorate the abuses of same is tantamount to making a deal with the Devil. Stock ownership serves three principal and legitimate ends: (1) to provide an ownership interest to persons desirous of controlling a publicly traded corporation (2) to provide an equity interest to persons seeking to maintain and increase asset valuation pursuant to capital appreciation and (3) to compensate shareholders, in the form of dividend distributions, for risking their venture capital. These ends all are positive, depend for their success upon the prosperity of the corporation, and promote the full and fair disclosure of all relevant information. That the ownership of stock may serve ancillary interests, such as by creating collateral that may be pledged elsewhere or by creating "liquidity" to facilitate other transactions, is to be expected, but not germain to the fundamental reasons for which the shares first were purchased. After all, cash, no less than shares, may be pledged, and cash much more than shares, may increase liquidity.
To the contrary are short sales. Short sales have but one objective: To bet on the misfortune--whether real or illusory, whether evident or obscure, and whether actual or contrived--of the corporation in which putatively owned. A wager of this nature is pernicious, is at odds with the most basic tenets of capitalism, and is antithetical to the very foundations upon which this Nation's economy were laid. Short selling requires no ingenuity, no thrift, no economies of scale, and no perserverence through adversity, but instead makes virtues of avarice, pessimism, opportunism, secrecy and failure. The short seller's risk is not that of an entrepreneur, but that of a scoundrel and sneak thief coming to rob in the night.
I urge the Commission to promulgate a rule that would ban outright the short selling of publicly traded shares.